by Staff Writers
Tokyo (AFP) Nov 20, 2012
Bank of Japan chief Masaaki Shirakawa on Tuesday slapped down a challenge to the central bank's independence by the prime-ministerial front runner, dismissing his fix for the economy.
Opposition leader Shinzo Abe has called for "unlimited" central bank easing and told supporters at the weekend he would make the Bank of Japan participate in his bond-buying scheme -- effectively printing money to generate inflation.
Japan has been mired in deflation for years, a situation that discourages consumers from spending in the knowledge that products will be cheaper in the future, sapping demand and dissuading firms from investing.
Shirakawa said Tuesday he did not want to comment directly on Abe -- leader of the Liberal Democratic Party and widely tipped to become premier -- but dismissed talk of forcing the central bank to buy government bonds in a bid to stoke the world's third-largest economy.
Central bank independence was a key feature of developed economies, and the fruit from "bitter lessons learned in Japanese history and the rest of the world", Shirakawa said.
"We need an organisation that looks at the economy and finance with a long-term view," he said in an apparent shot at Abe's politically-charged comments.
Shirakawa said Abe's plans are "not implemented in any developed countries", and were at the top of the International Monetary Fund's "never-do" list.
On Tuesday, the Bank of Japan held off launching fresh easing measures and kept interest rates unchanged, despite rising calls for more action as Japan's recovery following last year's quake-tsunami disaster stumbles.
A near-term inflation goal of 3.0 percent in a country suffering from deflation was "not realistic", Shirakawa said.
"What the general public hopes for is not simply an exit from deflation... but an improvement in the economy as a whole," he added.
Some economists have also criticised Abe's plan, saying the move could backfire and weaken Japan's already struggling economy.
Japan goes to the polls on December 16.
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